Why lower borrowing costs and a weaker pound could help make buying property in Knightsbridge and beyond a more attractive investment
Britain’s decision to quit the European Union could boost property values in Knightsbridge and other areas of prime central London that are popular with overseas investors.
The Bank of England has reduced its base rate, to a record low of 0.25% and there is reason to believe this could be further reduced.
In a speech at the Bank’s Threadneedle Street headquarters, Governor Carney explained that its Monetary Policy Committee, which sets interest rates, faces a trade-off between stabilising inflation, which could be stoked by a weaker pound, and shoring up growth and jobs. But he erred on the side of supporting growth with lower borrowing costs.
His announcement sent the pound sharply down against the dollar as financial market traders responded to the news of the stimulus.
One commentator noted: ““Currency movements as a result of Brexit could see a unique buying opportunity emerge. The uncertainty created could keep interest rates lower for longer which bodes well for investment in real estate.”
This makes property in London cheaper for overseas investors who use currencies with values based on the US dollar to fund their investments.
The benefits are not only visible to foreign buyers as UK-based investors using a mortgage to fund their central London property purchase are also able to access cheaper home loans now.
For example a homeowner in central London with a 25-year £500,000 interest only mortgage paying 2% above the base rate have seen their repayments cut from £1041.66 a month to £937.50. And if Mark Carney were to slash base rates to zero, the mortgage cost drops to £833.33 per month.
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